Imagine trying to navigate a voyage using only the wake of your boat. All is well as long as you are going in a straight line without obstacles, wind, waves, and currents. 

The wake of your boat is simply a lagging indicator of where you have been. It’s a by-product of the boat moving through the water and provides no assurance of where you are headed or what actions need to be taken to get to where you ultimately want to go.

To establish direction, and undertake course corrections, you need leading actions, like: turns of a steering wheel and adjustments to engine speeds to align with compass readings, etc.

In the start-up phase of every business it all about leading actions taken in pursuit of a vision, with clarity and inspiration provided by the leader. However, and sadly, most business leaders swivel in their chairs after financial results start to appear and become managers of lagging indicators.

Great leaders, however, stay focused on leading indicators—measures of their leading actions—to influence future directions and performance while using lagging indicators to analyze how well their leading actions are working.

In the automotive dealership a leading indicator would be appointments set for the following day, while the lagging indicator would be number of vehicles sold or gross generated. It doesn’t help to talk about lagging indicators unless it results in adjustments to leading actions.

For organizations in general it is said that the quality and cadence of meetings are a leading indicator, which provide better insight into the health and well being of the organization than do their financial statements.

Herb Mast is a Leadership Coach and Employee Engagement Specialist. Learn how he can assist you in implementing the principles and concepts presented here.